➤ State insurance regulators are willing to work with the federal government but continue to maintain that they are best positioned to oversee the industry.

➤ The National Association of Insurance Commissioners is prioritizing mitigation to deal with the impacts of a changing climate.

➤ Insurers must be ethical and transparent in how they utilize artificial intelligence so as to not perpetuate bias.

The US Labor Department's proposed fiduciary rule has garnered pushback from insurers while the US Senate is scrutinizing private equity's involvement in insurance.

These are just two of several ways that the federal government is increasingly looking to inject itself into the insurance industry's state-based regulatory system, a move that disturbs state regulators who believe that they are best positioned to regulate the industry.

S&P Global Market Intelligence recently caught up with Connecticut Insurance Commissioner Andrew Mais in his capacity as both president of the National Association of Insurance Commissioners and a state regulator to discuss a range of pressing issues including the role of the federal government in regulating the insurance space, the impact of climate change and the use of artificial intelligence.

The following interview has been edited for clarity and length.

S&P Global Market Intelligence: The National Association of Insurance Commissioners (NAIC) released its 2024 strategic priorities last month. How do you plan to address the issue of climate change?

Andrew Mais: I do think that the priorities that the NAIC and ... all of our members have agreed to this year are important, and they reflect what we consider to be the significant concerns facing the industry, concerns that we as regulators in collaboration with other stakeholders will need to address.

Take climate risk. That's a significant issue for pretty much everyone, certainly for people like me on the East Coast. I was just speaking at an event with the Rhode Island Director of Business Regulation, and she and I were both discussing the significant percentage of shore properties along the coast that are vulnerable to climate change. We may not be seeing what has happened in some other states yet in terms of availability, but that doesn't mean that we won't. This is an issue that we need to address.

We are making sure that every state has the ability to properly evaluate the impact through being able to properly evaluate models. Climate is one area where past performance is certainly no longer a guarantee of future results. We've seen how things are changing; we are increasingly reliant on these models. So that's one area that we that we have been focusing on.

We certainly hope that we will be able to address many of the challenges through mitigation. Mitigation is a way of reducing the risk that property owners face, whether it's commercial or residential. We've got to find ways to help property owners reduce that risk. With the risk reduced, it reduces the overall possible maximum losses that insurers will have to face, which means the lower, more affordable premiums.

Are you concerned that federal agencies and elected officials are looking to whittle away at the state-based system of regulation?

There's an awful lot going on. That might seem to, in a sense, create a perfect storm for us as state insurance regulators. We are focused on what we have done for the past 157 years, which is protecting consumers. We are the ones who are closest to consumers. We are the ones who best understand our markets. We are the ones who best understand insurance.

The McCarran-Ferguson Act clearly codified the role of state insurance regulators and regulation and put limits on what the federal government can do. We will work with any other organizations that have the interest of protecting consumers, but we also strongly believe in state insurance regulation.

How does the NAIC view cyber insurance and regulating artificial intelligence?

The insurance industry is at the nexus of this by providing cyber coverage that businesses need. We've seen that market shift over the past few years. Now it's not just a risk transferal, it's mitigation. If something happens, we're going to pay for it. But now insurers are sending people to the companies they cover, so that they know how to harden that critical information infrastructure.

Artificial intelligence really ties into my theme for the year, which is closing the coverage gap. I think through the judicious use of artificial intelligence, we can help lower the barriers to the availability and the affordability of insurance.

The flip side of that is artificial intelligence is just like any other tool. It can also be used to perpetuate the biases of the past. So that's where we as regulators come in. We want to encourage innovation and we want to encourage it as a way to provide consumers with the protection that they need.

When insurers use AI it has to be ethical, it has to be transparent, and it has to be understandable. If you're a consumer and you see your premiums go up, or if someone else was able to get insurance from some other company and you can't, and it's because of AI, you'll want to know why.